China YuHua Education Corporation Limited (HKG:6169) shareholders should be happy to see the share price up 22% in the last quarter. But that doesn't change the fact that the returns over the last three years have been disappointing. Tragically, the share price declined 70% in that time. Some might say the recent bounce is to be expected after such a bad drop. After all, could be that the fall was overdone.

The recent uptick of 9.6% could be a positive sign of things to come, so let's take a lot at historical fundamentals.

View our latest analysis for China YuHua Education

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the unfortunate three years of share price decline, China YuHua Education actually saw its earnings per share (EPS) improve by 26% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We note that, in three years, revenue has actually grown at a 12% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating China YuHua Education further; while we may be missing something on this analysis, there might also be an opportunity.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

China YuHua Education is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for China YuHua Education in this interactive graph of future profit estimates.

A Different Perspective

While the broader market lost about 19% in the twelve months, China YuHua Education shareholders did even worse, losing 70%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with China YuHua Education (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

We will like China YuHua Education better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.